Stratasys Ltd. Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Fair Value Measurement

Fair Value Measurement

12 Months Ended

Dec. 31, 2015

Note 3. Fair Value Measurement

The following tables summarize the Company's financial assets and liabilities that are carried at fair value on a recurring basis, by fair value hierarchy, in its consolidated balance sheets:

	December 31, 2015
	(U.S. $ in thousands)
	Level 2		Level 3		Total
Assets:
Foreign exchange forward contracts not
designated as hedging instruments	$	866	$	-	$	866
Foreign exchange forward contracts
designated as hedging instruments		23		-		23

Liabilities:
Foreign exchange forward contracts not
designated as hedging instruments		(432)		-		(432)
Foreign exchange forward contracts
designated as hedging instruments		(131)		-		(131)
Obligations in connection with acquisitions		-		(6,991)		(6,991)
	$	326	$	(6,991)	$	(6,665)

	December 31, 2014
	(U.S. $ in thousands)
	Level 2		Level 3		Total
Assets:
Foreign exchange forward contracts not
designated as hedging instruments	$	3,753	$	-	$	3,753

Liabilities:
Foreign exchange forward contracts not
designated as hedging instruments		(2,901)		-		(2,901)
Foreign exchange forward contracts
designated as hedging instruments		(1,243)		-		(1,243)
Obligations in connection with acquisitions		-		(35,656)		(35,656)
	$	(391)	$	(35,656)	$	(36,047)

The Company's foreign exchange forward contracts are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs).

Other financial instruments consist mainly of cash and cash equivalents, short-term bank deposits, current and non-current receivables, net investment in sales-type leases, short-term debt, accounts payable and other current liabilities. The fair value of these financial instruments approximates their carrying values.

The following table is a reconciliation of the change for those financial liabilities where fair value measurements are estimated utilizing Level 3 inputs, which consist of obligations in connection with acquisitions:

	2015		2014

	(U.S. $ in thousands)
Fair value as of January 1	$	35,656	$	29,025
Settlements		(4,994)		(10,795)
Additions		-		43,576
Change in fair value recognized in earnings		(23,671)		(26,150)
Fair value as of December 31	$	6,991	$	35,656

The Company's settlements during 2015 and 2014 of the obligations in connection with acquisitions are related to the deferred payments for the Solid Concepts transaction and the earn-out payment for the MakerBot transaction, respectively. The Company's additions to obligations in connection with acquisitions during 2014 related to the deferred payments in connection with the Solid Concepts transaction. Change in fair value recognized in earnings during 2015 includes an unrealized gain of approximately $17.5 million and a realized gain of $6.2 million due to revaluation of the deferred payments in connection with the Solid Concepts transaction. Change in fair value recognized in earnings during 2014 includes approximately $7.9 million unrealized gain due to revaluation of the deferred payments in connection with the Solid Concepts transaction and a realized gain of $18.2 million in connection with the earn-out payment of the MakerBot transaction. For further information on these obligations refer to note 2.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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